‘We aim to become more accessible with city stores’
After launching large-format stores in Mumbai and Hyderabad, Ikea is betting big on small-format stores to expand reach. Per Hornell tells Vaishnavi Gupta that with the rollout of city stores, the furniture chain hopes to cater to 500 million homes in India by 2025. Edited excerpts:
What prompted Ikea, famed for its expansive stores, to pivot to small-format stores in India and globally?
The city store format is in response to the continuous changes in customers’ shopping behaviour, and it allows us to adapt to smaller spaces in the urban context. People in big cities are living time-crunched lives; they want to shop for everything at their convenience. The possibility to utilise different store formats enables us to gain access to new locations. Our goal is to always be close to our customers, become more accessible, convenient, and create a great Ikea experience wherever and whenever they want. This launch is in line with Ikea India’s aim to become accessible to 200 million homes within the country in two years, and around 500 million homes by 2025.
In this new store set-up, we have put 6,000 products in focus, of which 2,200 will be available for takeaway and the rest will be home delivered. We have been working on this development globally and in India for the last three years. Globally, similar stores have been set up in cities such as New York, London, Paris, Moscow and Shanghai.
What does your offline retail expansion plan in India look like?
In the first phase of our expansion, the priority will be Mumbai, Bengaluru and Delhi, where we will expand our overall omnichannel presence. In Mumbai, we opened a large-format store last year, and will come to Worli with our first city store this year. We have plans to launch a second city store in the spring of 2022 in Mumbai. In Bengaluru, the third large Ikea store is expected to open in the middle of next year, which will be later followed by the city store. Then, as our third target market, we have two projects coming up in Delhi. Additionally, we will be expanding our new small-format stores in cities like Pune, Chennai, Ahmedabad and Surat in the second phase.
Ikea has been slashing the prices of its products. Will this be done across the board?
We have announced a 20% price reduction for nearly four dozen products, of which home furnishing is a big part. We are working intensively to make sure that furniture becomes even more affordable. Our economies of scale, customers’ love for our products, and local and sustainable sourcing initiatives ensure we can pass on the benefits to our customers in the form of price reduction. We are planning to reduce the prices further by making our sourcing more efficient, coming up with better transportation solutions and, in some instances, our profit margins taking a slight hit.
You have been following a cluster-based expansion strategy for online stores. When will the service be launched pan-India?
A cluster-based approach enables us to build the Ikea brand, have high customer centricity through the constant development of the shopping experience online or via the Ikea app, and ensuring that it’s supported by services like last-mile delivery, installation and assembly. Going forward, being driven by 200 million homes, we may launch a pan-India e-commerce channel, but that’s not on the cards at the moment; we will continue to focus on a cluster-based approach to build our online presence.
Ikea aims to garner 12% of its retail sales from the kids category. How will you go about achieving this?
In most mature markets, the kids range accounts for 6-8% of our business; this could go up to 12% in India over the next few years. Over 80% of the households in India live with children. From a local sourcing standpoint, we have been exploring several opportunities when it comes to toys and our kids range. We believe there is a possibility to partner with local suppliers to bring the Ikea knowledge and local competence together. While there are articles in the toys range that are locally produced, we are looking at expanding the soft toy range here in India, as India has a very strong base in textiles.